The early months of 2019 have been rather truncated for the dollar. Swings higher and lower have been a feature. Moves of around one to two weeks higher tend to be followed by moves of one to two weeks lower. The chart of the trade weighted Dollar Index shows this to be a key feature. After having recently rallied for the past couple of weeks, is now the time for another retracement lower for the dollar? There are several key charts pointing this way. A close on Dollar Index below 96.90 sees the market topping out again. This equates to EUR/USD pulling above $1.1260 (already underway) and Dollar/Yen below 111.20 (close). Gold is another chart on the brink too as it flirts once again with its long term pivot band $1300/$1310. Are the relatives turning round? Chinese data has picked up again recently, whilst the Eurozone is also showing a degree of stabilisation too. The rebound on Treasury yields has started to consolidate with the 10 year stuck under 2.55% (an old key low) and the dollar has lost some traction. This all coincides with a relative degree of calm, with newsflow on trade talks a little stale, whilst even Brexit volatility is reducing as a long extension with a softer outcome is materialising. This could perhaps be reason to lighten up on dollar long positions.
Wall Street closed mixed last night with the Dow lower by -0.3% whilst the S&P 500 was mildly positive at +0.1% at 2895. US futures are a touch lower by -0.1% early today. In Asia, the relative calm resulted in a very quiet session with the Nikkei +0.1% and Shanghai Composite -0.3%. In forex majors, there is another slightly weaker outlook forming for the dollar. This is a broad move with both the yen and Australian dollar very slight outperformers along with sterling. In commodities, this consolidation is also reflected on gold being all but flat. Oil is just holding ground after a strong move higher yesterday on potential disruption to Libyan oil supply due to domestic unrest which threatens the supply of around 1m barrels per day.
It is another quiet day on the economic calendar today with the US JOLTS jobs openings at 1500GMT the only real data of note. The jobs openings are expected to drop back slight to 7.55m in February (from 7.58m in January). It might also be worth keeping an eye out for Fed board member Richard Clarida (vice chair, centrist) who is speaking at 2345BST.
Chart of the Day – EUR/CHF
The latest in our charts looking at the changing fortunes of the euro comes with a rebound on Euro/Swiss. The recent acceleration lower of late March briefly breached the old September/January lows at 1.1180 to finally bounce from 1.1160 last week. The subsequent rebound is leaving a strong band of support at 1.1160/1.1180 to effectively continue the broad range between 1.1160/1.1500. This comes as the market is now positing a series of strong near term buy signals. With the RSI accelerating higher, a bull cross buy signal has confirmed on Stochastics. Furthermore, the MACD lines also crossing higher adds another bullish element to the bounce. There is further room for the move higher, with a move above 1.1260 opening a pull higher to the latest breakdown at 1.1310. The RSI which tends to move towards 60 during this range means that there is further upside potential in momentum too. With six successive higher daily lows, the initial support at 1.1210 is important, with intraday weakness seen as a chance to buy.